How Much Does Biden’s Spending Bill Really Cost?
When you add up the CBO score for all spending and tax cuts in the bill — that is, Americans will benefit from all the talk of the Democrats — you get about $2.2 trillion.
How did the law grow to $2.2 trillion?
The short answer is: paid leave. That measure alone increased the cost of the bill by more than $200 billion. A variety of other cost adjustments, such as housing and immigration provisions in the plan, as well as other expense additions, did the rest.
What about salt?
This is a tricky one. The second major change from Mr. Biden’s framework in the House bill is a change in the limits on deductions that individuals can take on federal income tax forms for state and local taxes. It’s a measure that will largely help high-income earners in high-tax states like New Jersey and New York. But oddly, it doesn’t add to the official cost of the bill—mostly because the measure is an accounting move, meant to give more gifts to some taxpayers in the short term, while reaping some benefits later.
Republicans capped the state and local tax deduction, known as SALT, at $10,000 per household in 2017. Under that bill, the cap would expire in 2026, meaning the unlimited deduction would return. Democrats plan to raise the cap to $80,000 per household for most of the decade before dropping it again to $10,000 in 2031. This means that families taking advantage of the deduction will receive a significant tax exemption for the next several years, but a smaller one for the last part of the decade.
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The Budget Office found that the change would essentially be a financial wash out for the government, rising slightly over a decade compared to the current system, as SALT is currently at a higher level throughout the decade rather than allowing the cap to disappear in 2025. Holds cap.
Some groups, such as the Committee for a Responsible Federal Budget in Washington, have chosen to break down the early-year benefits of the SALT change and add them to the total cost. The Times isn’t doing that, so that we stay consistent with how we add up the costs and benefits of the rest of the bill, which is measured throughout the decade.
Is this how the cost of the 2017 tax deduction was measured?
Mechanically, yes. Practically, no.
With both the 2017 law and this bill, we are trying to add cost to parts of the law designed to benefit people and companies. That’s the “price tag”.
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